This year did not start as ideally for most people with the ongoing COVID-19 pandemic that has infected more than 4.3 million of the global population. The global economy has been experiencing a downward trend even before the start of the coronavirus in January, largely due to the ongoing trade war between China and the US.
The International Monetary Fund (IMF) recorded the global real GDP growth rate at 3% last year, which is a drop from 3.6% back in 2018. Meanwhile, Indonesia’s growth in last year’s fourth quarter was recorded at 4.97% (yoy), which is a decrease from third quarter’s 5.02%. With the rate of COVID-19 infections still on the rise, further economic decline seems almost inevitable.
Consequently, the Jakarta Composite Index (JCI) suffered a weekly drop of 14.5% from 4,907 into 4,194 on the third week of March and has forced the Indonesia Stock Exchange (IDX) to initiate several trading halts to prevent the index from dropping into more concerning levels. In comparison, the JCI decrease in March is still not as severe as the two worst JCI drops in the country’s history, which was the drop from 736 in June 1997 into 263 on September 1998 throughout the 1997 Asian financial crisis period that lasted for a year and the decline from 2,830 on June 2008 into 1,146 on November 2008 triggered by the 2007-2008 subprime mortgage loan scandal in the United States. Notably, the 2008 crisis resulted in bankruptcies of notable corporations that handled stock brokerages such as Lehman Brothers, MF Global, and Ambac.
With the start of this year’s bearish market, the frequency of stock exchange transactions has lowered and initial public offerings (IPOs) as well as bond issuances have generally been postponed, resulting in escalating concerns that the pandemic could stir a financial crisis similar to 1998 and 2008.
In March, state-owned securities brokerage firm PT Danareksa Sekuritas has set an objective to underwrite three IPOs and a number of corporate bonds issuances during the first semester of 2020. From the three IPOs, two are property companies and one from an energy corporation. In addition, the company also has 10 bond issuance underwriting projects waiting in its pipeline. However, the drastic increase of COVID-19 cases throughout the middle of March has resulted in a majority of the companies to postpone their IPO and bond issuances. Throughout its history, Danareksa Sekuritas became the joint lead underwriter and advisor to several notable companies, such as PT PP Presisi’s Rp 1 trillion and PT GMF AeroAsia’s Rp 1.13 trillion IPOs in 2017, PT Pelabuhan Indonesia II’ $1.6 billion global bond issuance in 2015, and became a transaction advisor for PT Waskita Toll Road on the acquisition of PT TJT back in 2016.
There were 56 companies that went public in IDX at 2018. From the total, Danareksa Sekuritas became the joint lead underwriter for the IPOs of PT BRI Syariah, PT Asuransi Tugu Pratama Indonesia, and PT Jaya Bersama Indo with a total underwriting value of Rp 760 billion. Meanwhile, 343 OJK-approved companies also issued corporate bonds in 2018 with a total value of Rp 141.95 trillion. From the total, Danareksa Sekuritas was able to underwrite 11.94% of the bonds. In addition, the company was involved as an underwriter for corporate bonds and medium term notes (MTN) with a total volume of Rp 12.65 trillion during 2019.
Despite the difficult situation, Danareksa Sekuritas is determined to sustain the crisis with modifications to its business model implemented by its newly-formed board of directors.
In early March, the company introduced its new management, led by the newly-appointed CEO Friderica Widyasari. Before working at Danareksa Sekuritas, she was the president director of Kustodian Sentral Efek Indonesia (KSEI) from 2016 to 2019, and development director of the Indonesian Stock Exchange (IDX) from 2009 to 2015. Friderica received her bachelor’s degree in economics from Universitas Gadjah Mada (UGM) in 2001, attained her MBA from California State University, Fresno in 2004, and graduated with a doctorate’s degree in leadership and policy innovation studies from UGM in 2019.
Forbes Indonesia had the opportunity to interview Friderica on various topics surrounding the company back in March. Here are edited excerpts of the interview.
FI: Congratulations on your appointment as the CEO of Danareksa Sekuritas. What specific strategies has DS prepared to keep on earning income during this economic crisis due to the pandemic?
FW: With the unexpected emergence of COVID-19, our company has shifted its largest revenue contributor from underwriting to the advisory aspect of the investment banking sector, which includes transactional advisory (restructuring, merger & acquisition, equity, debt, and project f inancing) and general advisory. Many of our clients have started hiring us for our advisory services since they are now strategizing on how to sustain for the long-run instead of pushing for an IPO or bond issuance during this crisis.
FI: What is the key difference between leading a stock exchange regulator and a stock market player?
FW: During my time at KSEI, I prioritized on developing policies that would accelerate the growth of publicly-listed companies, while as a market player, I plan to introduce business models that would lead Danareksa Sekuritas into reaching its underwriting targets. One key takeaway from my experience as a regulator is that I have to ensure that Danareksa Sekuritas follows all the stock market regulations and practice good corporate governance because my reputation as a former regulator head is at stake.
FI: What is Danareksa Sekuritas’ competitive edge compared to other securities brokers?
FW: Our company has a vast distribution network with sales agents registered in its Sentra Investasi Danareksa (SID) system that partners with several universities in the country and also has strong backing from BRI as the majority shareholder. We also have a reputation as a securities brokerage firm with extensive experience in underwriting IPOs or bond issuances for state-owned enterprises (SOEs).
FI: Since your appointment, what has been the company’s biggest challenge and key aspect that needs to be improved?
FW: One notable challenge that I face since becoming the company’s CEO is fully regaining the clients’ trust since the 2015 alleged corruption scandal which involved former Danareksa Sekuritas executives and PT Sekawan Intipratama (SIAP) directors on the latter’s default on a repurchase agreement facility amounting to Rp 50 billion. We can assure our clients that Danareksa Sekuritas now is being run with good corporate governance and strict standard of procedures, while ensuring the most meticulous risk mitigation evaluation for each project.
FI: For this year, which industries do the companies in your underwriting pipeline originate from?
FW: We have a number of IPOs and rights issues from last year that were postponed to this year per our clients’ requests. For the IPOs, some of the companies are from the property and media sectors. Meanwhile, some of the rights issues are for banking and pharmacy corporations. Unfortunately, the ongoing pandemic forces us to wait and see for a bit longer.
FI: What will be the company focus for 2020?
FW: We want to become the leading securities broker house in Indonesia by empowering the retail market. This year, the company has set an objective to gain additional 50,000 retail clients to our existing 65,000 retail customer base. Since being acquired by BRI in late 2018, the company was given the approval to approach the country’s largest bank’s corporate clients to educate them on IPO strategies and also offer them underwriting services. In addition, Danareksa Sekuritas was also given the access to inform BRI’s retail clients on investment alternatives for the stock market that are available on our trading platform. Furthermore, we are targeting more individual clients that are existing BRI clients and employees. Of course, we need to keep strengthening our line of service in the investment banking sector as it is still our largest revenue contributor.
FI: Besides IPOs and corporate bond issuances, what other underwriting services does the company provide?
FW: Danareksa Sekuritas also functions as a reseller of government debt papers (SUN). The company is an auction participant during periods where the government issues debt papers with various maturity periods and later resells the SUNs to individual customers. Most recently, we started selling the Sharia-based Sukuk Retail State SR-012 series after it received certification for Sharia online trading from the National Sharia Board of the Indonesia Ulema Council (DSN MUI). Furthermore, the company also acts as one of the co-managers for the government’s global bonds in the offshore market and is also currently working together with stateowned pawnshop market leader PT Pegadaian to include pledge of shares agreement into Danareksa Sekuritas’ line of services.
FI: What kind of initiatives has Danareksa Sekuritas conducted to increase its brand awareness?
FW: The company has initiated marketing campaigns in collaboration with IDX, KSEI, universities, and local communities in order to increase our brand and online platform awareness amongst different demographic groups.
FI: Is Danareksa Sekuritas interested to underwrite IPOs or bond issuances for startups?
FW: There are a number of startups that have contacted us and showed interests on initiating an IPO or bond issuance with us as their underwriter. However, the ongoing pandemic has resulted in those initiatives to be postponed.
FI: Are you optimistic that the underwriting targets for IPOs and bond issuances for 2020 that the company has set before the pandemic can still be fulfilled by the end of this year?
FW: We have already conducted various scenario tests with different outcomes. If the pandemic ends in a few months from now, then we are conf ident that the targets we previously set at the beginning of this year can still be fulfilled by the end of this year. On the other hand, if the pandemic lasts much longer, then we are going to put even heavier focus on our advisory projects until the situation gets better.